South Korea will implement a framework for renewable energy corporate PPAs later this year according to the Ministry of Trade, Industry and Energy. As part of the ‘K-RE100’ system, energy purchases will be made selective by energy source, which will involve a revision of how the country’s Electric Utility Act is enforced. This is the Korean version of the global ‘RE100’ initiative.
Like Japan, South Korea committed itself to 2050 net-zero shortly before the November 3rd US elections – likely expecting Democrat victory and perhaps calculating that a climate promise made beforehand would seem more genuine rather than made under pressure. In December, six members of the SK Group which together account for 5% of total South Korean demand, joined the RE100 initiative.
As reported by Mercom Capital Group this week, corporate solar funding increased from $11.7 billion in 2019 to $14.5 billion in 2020, and that was mostly in North America, Europe, and Australia – you can expect the global increase this year to be much larger as East Asia joins in. Back in 2018, only 2 GW was signed in PPAs in Asia, and most of that was Australian and Indian.
As for how it plans to meet climate targets, the biggest sector slated for cuts are of course coal plants. With a moratorium on new nuclear plants after the current 5.4 GW under construction, and massive natural gas imports exceeded only by Japan and China, South Korea is comparable to the other 1st world Far East Asian democracies in terms of its current energy portfolio and future strategy.
South Korea has a couple of hundred MW of wind at present – but solar is 14.5 GW and rising by over 1 GW each quarter. Like Japan and Taiwan, space is very limited, which results in solar being limited mostly to rooftops, while floating solar and offshore wind will become a big thing during the decade. However, the two 2 GW tenders to be held this year will feature the option of projects over 20 MW for the first time. According to the ministry of Energy, any project above 1 MW will be able to participate in PPAs.
The Government’s K-RE100 system will allow sourcing of renewable energy through five options:
- A Green Premium system with a KEPCO-managed bidding process.
- Renewable Energy Certificate purchases run by the Korea Energy Agency, with first trial to come online this quarter.
- PPAs with KEPCO as intermediary; until now, KEPCO has had a total monopoly as energy seller, collecting and selling all power in its own right.
- Equity investment.
Moreover, sourcing renewable energy will be accounted against a company’s emissions, which will become important as 2050 nears. The heavy involvement of the state-owned monopoly utility is another point of comparison with Japan’s PPA situation, though that country has ten utilities not one.
Corporate members of the RE100 initiative must commit to 100% renewable electricity consumption, by 2050, but the average date for members is currently 2028 thanks largely to companies in Europe and the US which are the most mature markets for renewable energy PPAs.
South Korea’s participation in the initiative at least publicly goes back to shortly before its 2050 announcement last year; in September, a ‘Green New Deal’ policy meeting discussed that due to the lack of a framework to selectively purchase renewable electricity, Korea had no domestic companies participating in the RE100 scheme – and yet these same companies are coming under pressure from their foreign customers on the issue. In other words this step on South Korea’s part is heavily driven by Western pressure especially with Biden set to rejoin the Paris Climate Accords.
Another initiative being pushed by the government recently are plans to boost research into photovoltaics in the country – at present it’s considered to be too decentralized, and too skewed towards universities and types of photovoltaics which may never be commercially relevant. The government wants to invest in research in a way that swings it towards South Korea’s solar photovoltaics corporations and commercialization. In particular, it wants to invest $38.3 million in tandem solar research as the next practicable step, aiming to drive the cost of manufacturing solar panels down from $0.22 per Watt to $0.19.
A corporate PPA framework is one of the necessary steps to bring renewable development to the scale needed for 2050; according to the 9th Basic Plan for Electricity Supply, released in December, the nation is aiming for 40.3% renewable energy capacity in 2034.